Market Orientation and Stock Price Crash Risk—From Operating Risk and Digital Technology Perspectives

The frequent occurrence of firm-specific stock price crashes in China adversely affects investor wealth and economic development. Preventing financial risks and suppressing stock price crashes are of paramount importance for economic development. Existing scholarly research on stock price crash risk predominantly adopts information asymmetry and agency theory perspectives, exploring influencing factors through the perspective of “information disclosure” and “investor reaction.” However, few studies have explored the sources of bad news that trigger stock price crash risk from the perspective of enterprise operations. In reality, numerous companies ultimately face stock price crashes because of poor management and risk accumulation. The common thread among these cases is the neglect of genuine market demand and the competitive environment, indicating a lack of Market Orientation (MO). Market orientation emphasizes focusing on customer needs and competitor actions, enhancing sustainable development and profitability through the effective integration of internal and external resources. Prior research has revealed MO's positive effects on various financial and non-financial performance outcomes, including profits, market share, and innovation. Some scholars have also pointed out the significant influence of marketing on the stock market. Nevertheless, the existing literature has not definitively answered whether and how MO affects stock price crash risk. In particular, in the current context of intense competition and rapid development of digital technologies, how does the role of MO differ? Focusing on the above questions, this study employs a sample of A-share listed companies from 2010 to 2020. Utilizing machine learning methods to measure firm-specific MO based on MD&A texts and grounded in the Resource-Based View(RBV) and Dynamic Capabilities theory, this study investigates the impact of MO on stock price crash risk. The findings indicate that: ① MO significantly inhibits stock price crashrisk, a result that remains robust after a series of tests for robustness and endogeneity. ② Operating risk partially mediates the relationship between MO and stock price crash risk. Market-oriented enterprises can keenly perceive market dynamics, seize opportunities, and effectively integrate resources through their dynamic capabilities. This reduces the operational risks of the enterprise, thereby minimizing the generation of negative news and ultimately lowering the risk of stock price crashes. ③ This inhibitory effect is more pronounced in firms operating in highly competitive markets and those with a greater degree of digitalization. ④ Heterogeneity analysis shows that the inhibitory effect of MO on crash risk is stronger in firms with smaller size, smaller board size, and lower external audit quality. This suggests that the pathway proposed in this study serves as a substitute mechanism for the conventional route, whereby the governance level affects stock price crash risk through information disclosure. The contributions of this study are threefold: First, this study expands the research on the economic consequences of market orientation, extending it from the performance level to the field of capital market risk. It reveals the important mechanism through which market orientation promotes financial stability by enhancing the quality of physical operations, thereby enriching the literature on“marketing-finance integration”. Second, it supplements the pathways of stock price crash risk. Unlike the focus on information concealment, this study, based on RBV and Dynamic Capabilities theory, demonstrates a new path through which MO strategy reduces crash risk by curtailing the generation of bad news itself. Finally, by incorporating the contemporary digital context, it examines the significant moderating role of digital technology in the process through which MO influences crash risk, offering practical insights for enterprises to use MO strategies and digital technologies to mitigate risks